S&P downgrades Eurobank to D

Standard & Poor’s said it lowered the long-term counterparty credit rating on Eurobank Ergasias SA (Eurobank) to D (default) from SD (selective default).

The agency also said it also lowered the ratings on the bank’s senior unsecured debt to D from CCC- and subordinated debt ratings to D from C.

The downgrades follow Eurobank’s Nov. 4 launch of a tender offer to exchange securities from holders of its tier 1 debt, tier 2 debt and senior debt instruments with equity, S&P said.

This constitutes a distressed exchange because it implies that investors will receive less value than the promise of the original securities, the agency said.

This is because the issuer offers to exchange the securities for an instrument of lower ranking in the issuer’s capital structure, S&P said.

Additionally, the agency said it thinks the offer is not purely opportunistic given the financial position of the bank.

Following the launch of the offer and taking into account the capital controls that are still in place in Greece, S&P said it considers that Eurobank is in default on most of its on-balance-sheet financial obligations.

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